On August 27, 2021, Judge Anne-Christine Massullo for the Superior Court of the State of California granted final approval of a $575 million eve-of-trial settlement, which includes significant injunctive relief, in this closely-watched antitrust class action against Sutter Health, one of the largest healthcare providers in California, for restraining hospital competition through anticompetitive contracting practices with insurance companies.
In addition to recovering $575 million for unions and employers with self-funded health plans, the settlement enjoins Sutter Health to:
- Limit what it charges patients for out-of-network services, helping ensure that patients visiting an out-of-network hospital do not face outsized, surprise medical bills.
- Increase transparency by permitting insurers and self-funded payers to provide health plan members with access to pricing, quality, and cost information, which helps patients make better healthcare decisions.
- Halt measures that deny patients access to lower-cost plans, thus allowing health insurers and self-funded payers to offer patients more affordable health plan options.
- Stop all-or-nothing contracting deals, thus allowing insurers and self-funded payers to include some but not all of Sutter’s hospitals, clinics, or other commercial products in their health plans’ networks.
In addition, Sutter Health will be required to cooperate with a court-approved compliance monitor to ensure that it is following the terms of the settlement for at least 10 years.
This ground-breaking case has received significant press coverage, including by “60 Minutes” (December 13, 2020).
Industry economists have called the litigation and settlement precedent-setting:
“These plaintiffs are among the first, but will not be the last, to successfully challenge dominant health care systems who undertake land grabs to mark up prices at the expense of patients and employers,” Leemore Dafny, a Harvard Business School professor who studies the healthcare industry, wrote in an email. “This settlement has provided a marker for the rest of the nation.” (Published in Los Angeles Times, July 23, 2021)
Cohen Milstein is one of five firms that litigated this case since 2014 on behalf of a certified class of self-insured employers and union trust funds against Sutter Health. California’s Attorney General joined the suit in March 2018.
The complaint, filed on April 7, 2014, alleges that since the early 2000s Sutter Health has used anticompetitive contract terms and contracting practices with the major health insurance companies in California to insulate itself from competition and to increase prices. Sutter Health used the market power of certain “must have” providers to compel these insurance companies to include all Sutter Health hospitals, outpatient facilities, and physicians in their insurance products, even though several of those providers were more expensive than available alternatives. Further, Sutter Health prohibited the insurance companies from giving incentives to patients that would steer them away from high-cost Sutter providers and from disclosing information about Sutter Health’s prices to self-funded payors or insured individuals. As a result, patients have had limited ability and little or no incentive to choose a high-quality competing provider based on price. This has enabled Sutter Health to charge substantially inflated prices.
The court denied Sutter Health’s motion to dismiss in April 2016 and certified the plaintiff class in August 2017. California’s Attorney General joined the suit in March 2018. On October 16, 2019, on the eve of a three-month jury trial and after 5-1/2 years of scorched earth litigation, the parties in this closely-watched antitrust class action announced a settlement in principle of $575 million and comprehensive injunctive relief. Had the trial proceeded, Sutter Health would have faced potential single damages of hundreds-of-millions of dollars.
The case name is: UFCW & Employers Benefit Trust v. Sutter Health, et al., Case No. CSG 14-538451, Superior Court of the State of California, City and County of San Francisco.